The province is making major changes to Alberta’s energy market, as losses incurred under the previous NDP government are expected to be borne by Alberta over the next eight years.
On Thursday, the UCP government released an audit outlining the losses suffered by the 22-year-old Alberta Electricity Balancing Pool between May 1, 2015 and April 1, 2019.
Using already publicly available data, the UCP government ordered the audit in a “spirit of transparency” to “confirm” how the province’s balancing pool manages fixed-price deals with electricity producers.
According to the audit, $ 1.34 billion was lost due to losses from the sale of electricity and services under the Electricity Purchase Agreement (PPA) scheme.
“That’s $ 1.34 billion that Alberts have to pay through a regulator,” Dale Nally, assistant minister of natural gas and electricity, said Thursday.
“That’s $ 1.34 billion that should have remained in Albertan’s bank accounts and could be applied to any number of programs to improve our power system,” Nali said.
Instead, it was wasted and exists today as a payer’s debt, which is paid off with electricity bills through an additional fee, which is expected to last until 2030.
The consumer is expected to be charged with utility bills by 2030.
In 1998, PPAs were developed by the Progressive Conservative government as a way to transition to a competitive electricity market and produce more power to prevent disruptions.
Three power generators owned most of the facilities in the province, including Edmonton Power Corporation (now Capital Power), Alberta Power (now ATCO Energy) and TransAlta Corporation.
“The three big players have to hold the physical assets, manage them, their engineers on the ground, but the new players will have the right to control when they work and what they charge in the pool,” said Blake Schaffer, University of Calgary Professor of Economics.
The PPAs were designed to allow new electricity suppliers to enter the market, while allowing compensation to companies that own power plants.
The balancing pool was created as a quasi-artificial market for new utility companies to buy PPAs by the end of 2020.
“The balancing pool has been generating a lot of money for consumers in Alberta for about 16 years,” Schaefer said. “So those winnings were returned to your account.”
According to Nali, this is about $ 4 billion, which is returned to consumers on their utility bill in the form of a loan, which for the average private customer varies between $ 2 and $ 3.
From 2016 to 2018, Schaffer said low energy prices and rising carbon taxes undermine profits. A clause in the PPA allows companies to return them to the balancing pool if a change in government regulation makes them unprofitable.
“This is where the discount on your bill turned from $ 2 to $ 3 positive to $ 2 to $ 3 negative for the average private customer,” Shaffer said.
This small negative fee is due to the fact that the balancing pool takes out a loan and charges a rate to the Alberts to recoup lost revenue for several years.
“Alberts deserve better and should not be stumbled by promises to cut utility bills with taxpayer-funded interest rates or other short-sighted policies that both contribute to inflation and do nothing to improve future capacity or boost competition. “Nali said.
DISSOLUTION OF THE BALANCING POOL
He announced that UCP will introduce legislation in the near future that will officially eliminate the balancing pool, thus “increasing competition” and “modernizing” Alberta’s electrical system.
“We are correcting the mistakes made by the NDP,” Nali said. “We are doing what is necessary to support the people of Albert and to provide safe, reliable and affordable electricity for consumers and a competitive market for investors.”
As the government dissolves the balancing pool, Schaefer wonders what will happen to the tariff rider, who is recovering losses incurred by the government agency while it operates.
“Will this continue to affect our accounts or is the government simply taking on this debt or releasing it?” He asked.
“IT WASN’T FOR THE NEW”
Asked why the government had completed the audit when the information was already publicly available, Nali said it was a campaign promise given by the UCP to the Alberts.
“It was not about the news, but about confirming what we thought we knew, and that’s what this report does,” he said. “This independent report confirms that it is $ 1.34 billion.
At the time, UCP promised to commission the chief auditor to conduct a special audit, rather than hiring an external agency to complete the review.
“Our position was that we don’t think the people of Albert are worried about who did the audit, but that it’s an independent organization that did the audit,” Nali said.
He said he didn’t know how much it cost to audit taxpayers in Alberta. CTV News Edmonton requested this information from his office.
“We are working with all parties involved and will share the final costs of the independent review as soon as possible,” said Taylor Heads, Nally’s spokeswoman.
SUBJECT TO AUDIT?
Deloitte, the independent firm hired by the province to complete the audit, was instructed by the province to investigate from May 2015 to April 2019, and this period was specifically “requested”.
“I find this calculation interesting or strange,” Schaefer said. “(This) was done specifically to end part of 2019.
“The balancing pool existed and managed the PPA until the end of 2020,” the economist added. “And the prices were higher in 2019, in 2020, than before. So, if they switched to profitability, this point was excluded from the calculation?
“So I think if they did a proper audit of balancing pool losses, they had to do the whole time,” Schaefer said.
“THERE WERE BAD DEALS”
Kathleen Ganley, an energy critic for the NDP, said in a statement that the PPAs were “bad deals” signed by previous conservative governments in the 1990s.
“(They) guaranteed the profits of the utility companies by tying the hands of the government and exposing the taxpayers in Alberta to unreasonable risks,” Ganley said.
“No government should have signed such unilateral deals,” Ganley added. “The same approach is applied by UCP today.”
The energy critic called on the government to restore electricity prices to offer accessibility to Albert residents, otherwise utility payers remain vulnerable to “steep increases”.
With files from Chelan Skulski from CTV News from Edmonton
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